ASIL Insights

In a long-awaited decision confronting the intersection of federalism and foreign relations, the Supreme Court has struck down a Massachusetts law restricting state purchases from companies doing business in Burma. The Court's June 19 ruling in Crosby v. National Foreign Trade Council was on narrow, non-constitutional grounds. Although the decision puts similar state and local anti-Burma measures at least temporarily on ice, it is unlikely to emerge as the final word on foreign policymaking by state and local actors.

Crosby considered a 1996 Massachusetts law that in most instances barred state entities from purchasing goods or services from companies (foreign and domestic) broadly defined as doing business in Burma. The law provoked protests from Japan and the European Union, who subsequently challenged the measure in the World Trade Organization as inconsistent with U.S. obligations under the WTO Agreement on Government Procurement. Congress soon after adopted federal sanctions against Burma.⁽¹⁾ Among other elements the 1996 federal measure authorized the President to ban all new investment by U.S. companies in Burma (an authority later invoked),⁽²⁾ and directed him to develop a comprehensive, multilateral strategy to restore democracy in Burma.

An industry association of companies engaged in foreign trade challenged the Massachusetts law as unconstitutional and preempted by the federal statute. Lower federal courts considering the case ruled against the measure on broad constitutional grounds.⁽³⁾ In addition to accepting the preemption challenge, the First Circuit also found the Massachusetts law to violate both the dormant Foreign Commerce Clause and the more general dormant foreign affairs power, in line with the Supreme Court's 1968 decision in Zschernig v. Miller.⁽⁴⁾Zschernig had deemed unconstitutional state probate statutes restricting inheritance rights of persons residing in Communist countries insofar as the laws posed more than an "incidental or indirect" effect on foreign relations, even in the absence of any federal law or policy on the issue.

In his opinion for a unanimous court, Justice Souter found the state measure preempted by the federal sanctions regime, but abstained from addressing constitutional arguments against the law.⁽⁵⁾ Setting the standard for preemption as any state law "stand[ing] as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress,"⁽⁶⁾ the Court held the state law to undermine three elements of the federal Burma sanctions regime. First, the Court found the state law to undermine discretion expressly afforded the President by Congress in the devising of a Burma policy. Second, Souter detailed substantive differences between the state and federal approaches: the federal provided for a ban only on new investment while the state penalized pre-existing operations in Burma; the federal targeted only U.S. companies, while the state law extended to foreign concerns as well. 

Finally, the opinion found the state law to undermine Congress's instruction that the President undertake multilateral efforts to bring democracy to Burma. On this score, Justice Souter highlighted evidence that state measures such as the Massachusetts law had in fact proved a distraction to international efforts on the Burma front.⁽⁷⁾

The Crosby decision represents the Supreme Court's first consideration of state and local sanctions mechanisms developed during the anti-apartheid campaign of the 1980's. The Court's ruling represents a significant setback for human rights activism on that model, at least to the extent that other federal sanctions regimes include provisions similar to those highlighted in the federal Burma measure. But because the decision hinges on congressional intent, Crosby does not dictate the limits of state and local action in other foreign policy contexts. The Court carefully refused to speculate on how it would have ruled on the South Africa laws.⁽⁸⁾ Even with respect to the nonfederal Burma measures, Congress could in effect overrule the result in Crosby by expressly approving state and local measures such as the Massachusetts law (including those adopted by New York, Los Angeles, Philadelphia, and Vermont). Supporters of the Massachusetts law have vowed to seek such legislation in Crosby's wake.

The broader question of constitutional constraints on state and local foreign policymaking comes away from Crosby largely untouched. Justice Souter's preemption analysis does provide some ammunition for those seeking to entrench a dormant foreign affairs power. Most notably, the opinion invokes a primary rationale for unified federal policymaking that has also supported constitutional limitations on non-federal activity: "[i]t is not merely that the differences between the state and federal Acts in scope and type of sanctions threaten to complicate discussions," Souter observed, "they compromise the very capacity of the President to speak for the Nation with one voice in dealing with other governments."⁽⁹⁾ In the face of the Court's failure directly to confront the constitutional issues, however, the debate over how federalism principles should apply in the realm of foreign relations is unlikely to subside.

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About the Author: 
Peter J. Spiro is an Associate Professor at Hofstra University Law School. He will be directing a new Society research project on federalism, foreign relations, and international law.

Further Reading:
The decision may be found on the Internet at <http://www.supremecourtus.gov>. There is also an excellent list of related links at findlaw.com, <http://supreme.findlaw.com/townhall/hot/commentaries/burma.html>.

Following are a list of related articles:
Brannon P. Denning & Jack H. McCall, States' Rights and Foreign Policy, Foreign Affairs, Jan.-Feb. 2000, at 9.
Jack L. Goldsmith, Federal Courts, Foreign Affairs, and Federalism, 83 Va. L. Rev. 1617 (1997).
Michael D. Ramsey, The Power of the States in Foreign Affairs: The Original Understanding of Foreign Policy Federalism, 75 Notre Dame L.R.341 (1999).
Peter J. Spiro, Foreign Relations Federalism, 70 U. Colo. L. Rev. 1223 (1999).

Endnotes:
1. See Foreign Operations, Export Financing, and Related Programs Appropriations Act, 1997, § 570, 110 Stat. 3009-166.
2. See Exec. Order No. 13047, 3 C.F.R. 202 (May 20, 1997).
3. See National Foreign Trade Council v. Natsios, 181 F.3d 38 (1st Cir. 1999), affirming National Trade Council v. Baker, 26 F. Supp. 2d 287 (D. Mass. 1998).
4. 389 U.S. 429 (1968).
5. See slip op. at 9 n.8 (expressly reserving constitutional questions).
6. Slip op. at 8 (quoting Hines v. Davidowitz, 312 U.S. 52, 67 (1941)). The Court declined to rest its preemption analysis on a broader "field preemption" basis. See slip op. at 9 n.8.
7. See slip op. at 17-21.
8. Slip op. at 23-24. The Court also left standing its decision in Barclays Bank PLC v. Franchise Tax Bd. of Cal., 512 U.S. 298 (1994), which found constitutional a state tax law even though it had provoked substantial foreign offense. Barclays could still provide a platform from which to relax constitutional limitations on state and local foreign policymaking, at least in the absence of conflicting federal legislation.
9. Slip op. at 17. The "one voice" argument stands as a core rationale for exclusive federal policymaking. See, e.g., Japan Line, Ltd. v. County of Los Angeles, 441 U.S. 434, 449 (1979) (finding state tax on foreign containers to violate Foreign Commerce Clause).
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